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Radical recommendations on capital funding in new IPPR report

Policy think tank, the Institute for Public Policy Research (IPPR) has called for significant increases in capital funding as well as urgent steps to address the PFI legacy in a new report.


The 'make do and mend' health service: solving the NHS's capital crisis by Chris Thomas, a Research Fellow at the IPPR, warns that further transformation of the health service will be impossible under the current capital regime. The report recommends a new settlement to fund capital and support transformation of £5.6 billion a year, sustained over five years and rising with inflation, funded by public borrowing.


It further recommends £4 billion should be made available every year in a transformation fund to support upgrades to the health infrastructure. "Anything less will leave us lagging behind international competitors - with the £2 billion one-off cash injection (a less than 25% uplift) announced earlier this year a wholly insufficient sum to either ensure safety or improve outcomes."


The report also states that the legacy of PFI, coupled with these levels of low investment, is harming quality of care for patients. Whilst acknowledging that PFI was a mechanism to bring capital funding into the system, it says it has turned out to be a "bad deal" with some Trusts forking out up to 17% of their annual income on PFI repayments. 


The PFI legacy should be "urgently addressed," and the report states: "We recommend a right of enfranchisement for local NHS Trusts, where PFI tenures can be transferred into a freehold tenure through a one-off, standardised payment. This would bring the most toxic deals back into public ownership and improve financial stability across the NHS."


It further recommends that whilst this is implemented, any Trust paying more than the average 5% of income on PFI should receive direct financial support.


Saffron Cordery, Deputy Chief Executive of NHS Providers says: "What the NHS now needs is clarity on how Trusts will be able to access finance schemes and the part that they may have in NHS infrastructure in the future.


“We know the government shares our aim of a properly-funded and well-designed system of capital funding, but this support now needs to be translated into urgent action, because the risk to patients is rising every day.


“The option for Trusts to have a right to buy out these contracts is welcome but with NHS funding constrained and diverted away from capital over the last few years, it’s vital to remember that Trusts don’t always have the means to do this.


“Not all PFI deals are alike: there are many Trusts with well designed PFIs that have benefited their patients and that are good value, but equally it is undoubtedly true that some deals were badly designed and have left Trusts with repayment bills that they cannot afford.”


Click here to read or download the report.